Legislation providing an apology and amnesty to the former troops, who were branded deserters after returning home from battle, was passed in the Dail on Tuesday.
Justice Minister in the Republic of Ireland, Alan Shatter, said it will make amends for the past and will recognise the efforts of those who fought on the Allied side against Nazi Germany, but who were court-martialed or dismissed from the defence forces as a result.
"It gives important statutory expression to the apology given by me on behalf of the state last year for the shameful manner in which they were treated," said Mr Shatter.
"Unfortunately, many of the individuals whose situation is addressed in this Bill did not live to see the day that this state finally acknowledged the important role that they played in seeking to ensure a free and safe Europe."
The Defence Forces (Second World War Amnesty and Immunity) Bill 2012 provides a pardon for the roughly 5,000 soldiers who were removed from the Irish Army under special powers introduced during WW2, known as the Emergency in neutral Ireland.
They faced widespread persecution when they returned home.
These men who fought bravely and with honour to rid Europe of fascism should have been commended instead of condemned
Northern Ireland's Justice Minister, David Ford, said the legislation which was passed in the Oireachtas recognises the bravery of the soldiers, some 70 years on.
The Alliance leader said: "This legislation before the Dail recognises the discriminations they faced when they returned to Ireland following the Emergency.
"It also plays a part in reconciliation in these Islands and recognises the shared values we have in our history. Just last year, both the Taoiseach and Tánaiste laid wreaths in Enniskillen and Belfast during remembrance services highlighting the fact that people from all backgrounds came together and fought side by side in both World Wars One and Two."
North Down MLA Peter Weir said: "This announcement by the Irish government has ensured that an historic injustice has been put right. These were thousands of Irish soldiers who stepped forward to fight against fascism and for the freedom of Europe.
"It is clear that progress has been made in relations between the Republic of Ireland and the United Kingdom, and much of that must be down to the impact made by Her Majesty the Queen on her historic visit to the Republic."
SDLP Councillor Pat McCarthy said: "Nazism was a real evil and something which thousands of Irish soldiers wanted to fight against. That they were labelled deserters rather than heroes on their return is shameful.
"Today's apology is welcome and is recognition, albeit late of the outstanding and courageous service of Irish soldiers during the Second World War."